Thursday, August 10, 2017

Markets tumble as Asian tensions grow

Dow dropped 204 (finishing at session lows), decliners over advancers almost 6-1 & NAZ retreated a very big 135.  The MLP index gave back 3+ to 281 & the REIT index fell 2+ to the 347s.  Junk bond funds were off 1-2% (big in this sector) & Treasuries rose.  Oil lost 1 to the 48s & gold advanced sharply (more below) as stocks were sold.

AMJ (Alerian MLP Index tracking fund)

Live 24 hours gold chart [Kitco Inc.]

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US indices closed at session lows, with the Dow & NAZ posting triple-digit point declines, as investors fretted over escalating tensions between the US & North Korea.  North Korea said it was completing plans to fire 4 intermediate-range missiles over Japan to land near the US Pacific island territory of Guam in an unusually detailed threat.  The threat followed Pres Trump's warning that any threats by Pyongyang would be "met with fire and fury like the world has never seen."  Those comments ended the Dow's 9-day streak of record closes.  Today investors scampered to safe-haven assets such as gold, helping the precious metal hit a more than 2-month high.  The Volatility Index (^VIX), the most widely followed barometer of expected near-term stock market volatility, rose to a near 3-month high of 15+.

Simmering North Korea tensions knock back Wall Street

The federal budget deficit fell sharply in Jul from a year earlier, largely because of a quirk in the calendar.  The Treasury Dept said that the budget gap came in at $42.9B last month, down from $112.8B in Jul 2016.  The bulk of the improvement came because benefit payments that normally would have gone out in Jul went out in Jun this year because Jul 1 fell on a Sat.  Thru the first 10 months of the budget year, the federal gov is running a $566B deficit, up 11% from the same period of fiscal 2016.  Tax collections are up 2.3%, but spending has risen 3.6% so far this fiscal year.  The Congressional Budget Office forecasts that the deficit for the budget year ending Sep 30 will come in at $693B, up from $584B in budget year 2016.  Congress is facing a deadline of Oct 1 for getting a budget approved for the next fiscal year or face the prospect of a government shutdown.  Lawmakers are expected to pass a stop-gap spending measure to buy time to iron out differences.

US budget deficit narrowed to $42.9 billion in July

Gold prices finished at their highest level in more than 2 months, adding to the previous session's sharp daily rise, as simmering North Korean tensions buoyed haven bids.  Dec gold finished up $10.80 (0.8%) at $1290 an ounce, marking the highest level for a most-active contract since Jun 7, when the metal finished at $1293.  Geopolitical tension persists after a North Korean army commander said "sound dialogue is not possible" with Pres Trump & "only absolute force can work on him," according to state media.  The rise for the yellow metal also comes as the Dow, S&P 500 & NAZ were to post their worst succession of down days since Apr.

Gold Settles At 2-month High Amid Geopolitical Tensions

More Americans applied for jobless aid last week.  Despite the small increase, the number seeking benefits remained close to historic lows.  Weekly unemployment applications rose 3K to a seasonally-adjusted 244K, the Labor Dept reported.  The less volatile 4-week average declined 1K to 241K.  The number collecting unemployment benefits has fallen 8.8% over the past 12 months to 1.97M.  The job market appears solid as the US enters its 9th year of recovery from the recession.  Employers are holding onto workers with the expectation that business will continue to improve.  Jobless claims, a close indication of layoffs, have come in below 300K for 127 weeks in a row, the longest such stretch since 1970 (when the population was much smaller).  The unemployment rate has fallen to a 16-year low of 4.3%.  The gov report for Jul showed that US employers added 209K jobs.  A particular bright spot is the fact that more Americans are coming off the sidelines & finding jobs.  The economy revved up this spring after a weak start to the year, fueled by a surge in consumer spending.  GDP expanded at a 2.6% annual rate in Q2, more than double the revised 1.2% in Q1.  This year, the economy is expected to grow at about 2%, roughly in line with annual gains seen during the recovery.  Consistent hiring has helped sustain the gradual recovery, although the expansion is starting to show its age as the pace of job gains has slowed this year.

US weekly requests for jobless aid up 3,000 to 244,000

This was a tough day for stocks & probably on those new guys who are not familiar with declines.  The stock market is vastly overbought & a retreat is needed to clear out weak investors.  While the Dow is about 200 below its record highs, it's still up a massive 3½K (one whopper advance) since the election.  More selling may be ahead as Asian tensions show no sign of easing.  But declining markets provide opportunities for buying quality stocks at better prices (with higher yields).

Dow Jones Industrials

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